Killer Bunny

If Anyone's Interested

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Interesting things going on in China.

http://www.ft.com/cm...l#axzz1q52wAs00

China cracks down on Maoist websites

Apparently whipping up support for Bo Xilai - the guy who was arrested. His son went to Harrow (recommended by the English Old Harrovian who died in mysterious circumstances after falling out with his wife over a business deal). Strange behaviour for a 'Maoist' you might ask to go to Harrow. Apparently Bo Xilai was 'intrigued' by the class system in the UK and how the upper classes have managed to keep a hold of power for so long...probably to try and create his own dynasty methinks. Some think he was using Maoist denunciations to get rid of people and seize businesses in Guangdong Chongqing province. Things came to a head when his number 2 went to the US embassy to claim asylum after fearing for his life - Wen Jia Bao did not hesitate and denounced his Maoist rhetoric and he was arrested. Seems they're trying to stop some 'nasties' from taking power. All very unstable behind the scenes.

Edited by hotairmail

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Citigroup Economic Surprise Index seems about to decline into negative territory. Presumably the NFP data will be enough. Doesn't bode well for equities.

http://www.bloomberg.com/quote/CESIUSD:IND/chart

Note of caution - this article notes the poor predictive power of the index (against SPX) before the 2008 crash.

http://articles.businessinsider.com/2012-04-05/markets/31292553_1_stock-market-s-p-business-insider

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Interesting things going on in China.

http://www.ft.com/cm...l#axzz1q52wAs00

I am on the smartphone so will keep this short. Basically the CCP is naturally riven by cliques but occasionally it comes into the open (ie Tiananmen and now the Bo thing). After Tiananmen the Shanghai clique led by Jiang Zemin took control, but Hu and Wen (Wen is the protege of Zhao Ziyang who got ousted for saying the students might have had a point, his book is worth a read) have had the last 8 years in power. However they have needed to operate by getting consensus across the party, the Mao and Deng godlike powers are over. Getting rid of Bo has apparently taking a year of getting the necessary support before moving against him.

This is part of the reason why I am bearish on China. The CCP, contrary to mainstream opinion, is not like the Borg and you don't need much exposure to China to know this. I believe if things get bad, fault lines could appear rapidly (like Tiananmen) and the party paralyzed by indecision.

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The Revenge of Wen Jiabao

http://www.foreignpo...e_of_wen_jiabao

(author is an aussie journalist who's talked/written quite a bit about china, mafia, corruption. Is interesting I think, with some balance of critique in the comments and in common sense reality that can have opinions but know sweet fa about it really).

and while sort of on the subject: Honor Thy Creditors Beforan Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?

http://www.hkimr.org...ge_id=10&id=210

Thanks for those.

And FaFa for your insights. Tell us more when you have the time.

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An interesting speech by Ben Broadbent (15/3/12) (which I appear to have missed at the time) questioning some commonly held views on 'deleveraging' especially relating to UK housing market, MEW, and 'normalisation' of rates.

http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech553.pdf

Essentially arguing (evidentially) that it was not easy credit but rather the longer term falls in real rates pushing down on rental yields which caused the rise in house prices. An interesting chart on MEW as 'transfers' as opposed to 'consumption' and on the causal effect of rising house prices driving increased mortgage debts rather than vice-versa.

What must be true is that larger aggregate balance sheets are more exposed to interest-rate risk. If the property-related explanation for the expansion in household balance sheets is correct, then one important corollary is that the debt and the financial assets are held by different people – the debt by the young (roughly speaking), the assets by the old. In time, this intergenerational transfer may get unwound, via bequests. But it may not (the old could yet consume their capital gain) and, in any case, the gross debt has to be serviced in the meantime4. Much of the expansion in balance sheets (I have argued) was due a secular decline in the long-run, risk-free rate of interest, and they are now more vulnerable to a reversal of that trend. I will discuss the risks and implications of a rise in long-term interest rates later on

This won't be a 'popular' view with many on here but nontheless makes sense. In some ways it accords with what I understand to be Scepticus' argument.

Perhaps the 'imbalances' resulting between young and old will not be significantly rebalanced until the old 'die off' or are in some other way fiscally 'nudged' into deleveraging their b/sheets.

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This won't be a 'popular' view with many on here but nontheless makes sense. In some ways it accords with what I understand to be Scepticus' argument.

Yes it does.

However I don't think broadbent actually made any suggestion what might have caused the secular decline in risk-free rates apart from pointing out they were much higher than normal in the 1980s/1990s.

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Technological changes and liquidity continues apace.

CDO's being tested for the 10 tn Trade Finance market.

http://www.ft.com/cms/s/0/45a5d23e-7bdc-11e1-9100-00144feab49a.html#axzz1rTx9cQmO

Banks test ‘CDOs’ for trade finance

By transferring the bulk of such exposures off a bank’s own balance sheet, and on to third-party investors, the capital requirements would be reduced.

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Yes it does.

However I don't think broadbent actually made any suggestion what might have caused the secular decline in risk-free rates apart from pointing out they were much higher than normal in the 1980s/1990s.

Well he doesn't it that speech, no. I don't know if he has elsewhere (?).

Perhaps you ought to drop him a line.............

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Michael Pettis - The ways China can rebalance

http://www.economonitor.com/blog/2012/04/the-ways-china-can-rebalance/

And this is my point. If you believe my assumptions are correct, then you should agree that China has no choice but to follow one or more of these paths. If privatization is not an option, then a collapse in the economy caused by a rapid adjustment in interest rates and the currency (the second option) might be. If that is ruled out, then perhaps the outcome will be a surge in government debt (the fourth option again), and so on.

This what I mean by the economic constraints that limit the choices Beijing can make. It doesn’t matter what anyone thinks or wants Beijing to do, if the plan violates the economic constraints, it cannot be done. To be really complete we should outline the political constraints, the environmental constraints, the demographic constraints, the external trade constraints, and so on, although of course this is way beyond my ability, but each of these exercises allows us to escape from the confusion of stated intentions and to focus on the possible.

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:D

This is weeks overdue.

Unless we get a repeat of the Nov '10 'correction' which was blasted out of the water by Benjamin.

Am waiting to see what happens as we retrace to 5600-5700 (basis FTSE)

#Patienceisavirtue apparently

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